The National Treasury building in Nairobi. FILE PHOTO | NMG
The National Treasury has picked only Sh5 billion out of a
possible Sh55.8 billion that investors subscribed for in an
infrastructure bond floated last week.
In a statement
announcing the results of the auction, Central Bank of Kenya acting
director for financial markets, John Birech, said that the new borrowing
by the Treasury would be only Sh5.04 billion.
The
government was seeking Sh40 billion in a 15-year bond and was offering
to pay investors 12.5 per cent as a coupon (interest) annually.
The subscription of Sh55.756 billion was a 139.39 per cent performance rate – well beyond the amounts sought.
Average yield
The weighted average yield that investors were asking for stood at 13.026 per cent.
This
means that they wanted to get it at a discount in order that their
eventual return is higher than what is represented by the interest paid
on it.
However,
the Treasury took the paper at a yield of 12.505 per cent, just about
the same as the coupon or interest to be paid on the paper.
The
Treasury rejected all the expensive bids as it tries to keep the price
of public debt low. In the previous auction for such a bond the rate was
13.177 per cent, but has now only taken those bid with no more than
12.5 per cent yield.
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